Viewpoint: What kind of budget?

Saskatchewan citizens are awaiting budget day (March 22) with some trepidation. The provincial government has forecast the current year’s deficit at $1.2 billion. The premier has floated wage restraints, reorganizations, and privatizations as possible answers. So what should Saskatchewan people expect?

We suggest four things: a clear statement about public expenditure sustainability; a short-term financial plan; a long-term strategy for revenues; and a long-term set of priorities for expenditures.

First, a clear statement about the sustainability of public expenditures. The Saskatchewan economy is heavily dependent on resources, and resources are inherently volatile. Planning must reflect this reality. The main reason for the deficit is falling natural resource revenues, mostly related to oil and potash. Over the past decade, Saskatchewan experienced an unprecedented run of record-setting commodity prices. Saskatchewan’s public expenditures also rose greatly and overall debt increased. With the drop in resource revenues, these expenditures have become unsustainable.

Put simply, Saskatchewan has been using the revenues of the resource boom to finance increasing spending. The province’s current and future public expenditures are not sustainable on the basis of regular, ongoing taxes paid by citizens, consumers, businesses, and corporations. On budget day, the government should acknowledge the structural shortfall in revenues and should not budget based on the expectation of another resource boom.

Second, present a clear plan to mitigate some of the immediate shortfall. The largest cost in public service provision comes from labour. The government has already suggested the possibility of wage rollbacks, or even layoffs. There could be across-the-board reductions in budgets or grants. Service quality and provision may decline.

Wage restraint should only be a short-term solution. Concerted pressure can hold wage levels down or send workers on unpaid furloughs, but sooner or later the salaries and the hours go back up, or people end up leaving. Moreover, the proposed 3.5 per cent public sector wage rollback is only projected to cover about 20 per cent of the shortfall.

The government should avoid privatizing public assets for the purposes of providing one-time sources of revenue. There may be good reasons to sell off all or part of one or more of the Crowns, but these decisions should only be driven by transparent, public policy objectives.

Whatever immediate actions the government takes should be accompanied by a long-term plan to balance regular, ongoing spending with regular, ongoing revenues.

This brings us to the third expectation — a long-term strategy for public revenues. Unless Saskatchewan residents are willing to absorb deep cuts to public services such as education and health care, there is no way to balance the budget over the longer term without increased taxation, and citizens should be prepared to pay more for the services they receive. They should also seek assurances from the government that the budgeted contribution from natural resources will be based on the actual revenue gleaned during years of poor performance, rather than on hopeful expectations of a bumper year. One idea would be a commitment, ideally enshrined in legislation, to put future increases in resource revenues into a sovereign wealth fund that could be strategically drawn upon in the future to fund capital or infrastructure investments.

Fourth, and finally, the budget should clearly indicate what priorities will drive continued operational spending. Priority areas should be based on the needs of Saskatchewan people and funded in ways that sustain desired and stable levels of services. Citizens should look for broad-based priorities, not ones that benefit only the loudest or most powerful groups. Care should be taken to ensure that the least well-off do not shoulder a disproportionate amount of the cost simply because they lack voices at the table.

As part of this restructuring, new approaches and new delivery models may allow the government to maintain quality services (or even improve them) with fewer resources. While this is sometimes possible, restructurings do not always save money, and they are always hard work.

Given the inevitably cyclical nature of a resource-based economy, every couple of decades the government of the day in Saskatchewan is required to address intense financial pressures. As in the past, the government today will be judged on how it responds to the challenges.

Brett Fairbairn and Murray Fulton are professors at the Johnson Shoyama Graduate School of Public Policy at the University of Saskatchewan. Dionne Pohler is an associate professor at the Centre for Industrial Relations and Human Resources, Woodsworth College, University of Toronto.

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